The new free trade agreement between the United States and Mexico that was struck by the two countries and announced by the US president Donald Trump on Monday has the potential to put the US president in a better standing to pursue further with his trade spat with China and to dig in his feet deeper into the issue.
Just before the forth coming midterm elections in the US, this the achievement of the trade deal with Mexico will be come in handy politically for Trump and the Republican party. This would also provide the Trump administration much more leg space to continue with the hard line trade policies against China. This despite the fact that businesses in both the countries have suffered because of the US china trade war.
Further, the Mexico-US trade deal has also shown that the US under Trump can be a negotiator that can be relied on and be taken in good-faith which also means that it is not likely that the Trump administration would back tack from its demands in the trade war with China till such time that the Chinese government gets itself to the negotiating table and conceding to some of the demands of the US related to trade. And till such time, it is the announced stance of the Trump administration that it would likely follow a familiar pattern of tariff escalation and retaliation.
Even as the US and Mexico were negotiating the finer points of the trade deal, the trade war against China had already been taken to new heights with the imposition of two rounds of tariffs on $50 billion of Chinese imports into the US and threats for more tariffs. The largest threat of tariffs so far that has bene issued by the Trump administration is imposing 25 per cent tariffs on Chinese goods imported int the US worth $200 billion. That was a significant increase in tariff rate compared to the original threat of imposing a 10 per cent tariff on the same volume of Chinese goods that was issued by Trump earlier.
Additionally, it now appears that the US is seeking China to conduct some form of structural reforms in its trade policies and practices instead of the earlier simpler position of the Trump administration where it demanded that China take steps to normalize the huge trade deficit that the US has with China. but analysts feel that China is not likely to cave into those demands from the US.
The Nafta deal itself however is at a risk because Canada has not yet signed the new deal and was not part of the latest round of negotiations as it was on earlier occasions. Trump now wants to terminate the Nafta agreement altogether and if Canada does not sing up that Nafta agreement could ultimately come to an end.
(Adapted form Fortune.com)